Airport, airline and departure time choice and substitution patterns: An empirical analysis: Fid-Bau Portal

Airport, airline and departure time choice and substitution patterns: An empirical analysis

Escobari, Diego

Highlights•Estimate general substitution patterns and control for endogenous prices.•Use an original data set with prices and characteristics of all available flights.•Identify the carriers that face relatively greater competition.•Our multi-airport metropolitan area can be grouped as a single market.•Greater switching across carriers than across airports or departure times.

AbstractThis paper uses the random-coefficients logit methodology that controls for potential endogeneity of prices and allows for general substitution patterns to estimate various demand systems. The estimation takes advantage of an original ticket-level revealed preference data set on travels from the New York City area to Toronto that contains prices and characteristics of not only flight choices but also of all non-booked alternative flights. Consistent with having higher valuations, our results show that travelers buying closer to departure have a higher utility of flying. Moreover, consumers’ heterogeneity decreases as the flight date nears. At the carrier level, we identify which carriers have more price-sensitive consumers and which carriers face greater competition. In addition, the results suggest that our multi-airport metropolitan area can be considered as a single market and that JFK and Newark are relatively closer substitutes. Overall, consumers are more willing to switch to alternative carriers than between airports or departure times.